What Licenses Do Bankers Have to a Sell Fixed Annuity?
An employee at a bank may offer to show you how an annuity can earn you more interest and save on taxes. An annuity is not a banking product, but the function of annuities make them appropriate savings vehicle for some bank customers. A bank employee who sells annuities must have an insurance license.
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Annuity Products
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Fixed annuities are interest-earning contracts issued by life insurance companies. An annuity does not provide life insurance protection, however. The main advantage of annuities is that the interest earned grows tax deferred until withdrawals are made in retirement. An annuity is usually purchased with a single lump-sum investment. A fixed annuity can also be "annuitized" to provide a lifetime monthly income to the annuity owner. Annuity buyers are often interested in an annuity due to the typically higher rate of interest when compared to bank CD rates.
Insurance License
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To sell fixed annuities, a bank employee must obtain a life and heath insurance agent license. State departments of insurance issue insurance licenses. Obtaining a license involves taking state-mandated pre-licensing courses and passing a test covering insurance principles and state insurance laws. In most states a licensed agent must take continuing education courses every couple of years. The bank usually pays the costs for an employee to get her life insurance license.
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Disclosures
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When a bank employee sells an annuity, the employee must disclose pertinent information about the annuity contract. The most important fact is that the annuity is not a bank product and is not guaranteed by federal insurance. The disclosure will also include any insurance company penalties and tax penalties for early withdrawal from the annuity. The safety of an annuity is based on the financial stability of the issuing life insurance company. The bank employee should also discuss the financial rating of the insurance company.
Types of Employees
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Depending on state laws and the bank management preferences, the person selling annuities in the bank may be a bank employee or the employee of a third party company which provides licensed sales agents to the bank. The sales of annuities through bank branches became prevalent in the mid-1990s using third-party companies. Changes in the banking laws have allowed banks to license bank employees to sell annuities as well as bank products.
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References
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